alt Hacker NewsThe article describes Uber's surge pricing as a form of surveillance pricing, but this is misleading. The primary purpose of surge pricing isn't to maximize profit, it's to increase supply. Dynamic pricing in a 2-sided network is different than in retailing.
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>The primary purpose of surge pricing isn't to maximize profit, it's to increase supply.
Your thinking is overly rigid here. An action can be multiple things at the same time. Uber's incentive is to maximize transactions per unit time window. You are correct in that surge pricing on a first level pass isn't about profit maximization. You have to go up a layer of a straction or two before that becomes the case. Uber has to increase supply to fulfill transactions for a signalled demand, signalled demand is high, thus signaling more profit to be made, therefore the surge while at first seeming like a negative signal to consumers, is still acting systemically as a mechanism to bring about profit maximization.
Hiding this type of thing from the end consumer, or not saying it out loud, is a favorite of the current batch of business people.
Can you explain why they are mutually exclusive?
> The primary purpose of surge pricing isn't to maximize profit, it's to increase supply.
Hm. This doesn't pass the sniff test for me.
If say 500 people take an Uber to a venue or need an Uber from the airport, increasing the price more often than not is just going to increase revenue. The price increase doesn't force you into an alternative choice if there are no alternatives.
Many places don't have substantial taxi or similar services, and public transit doesn't meet that same need with people in suburbs / ex-urbs / rural.
It isn’t just to increase supply, it also reduces demand. It’s a mechanism for finding a new market clearing price… that necessarily maximizes profit